The company's CEO, Elon Musk, described the decision as a challenging one, necessitated by the company's struggle with declining sales amidst a fierce price war in the electric vehicle market.
The announcement, made via an internal memo to Tesla's global employees, did not specify the exact number of jobs to be affected. However, with the company's latest annual report indicating a global workforce of 140,473 as of December 2023, a reduction of over 10% implies that at least 14,047 employees are set to receive termination notices.
In the memo, Musk wrote, "As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity." He further added, "As part of this effort, we have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally." The memo was initially reported by tech publication Electrek.
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Adding to the company's instability, Tesla's Senior Vice President Drew Baglino, responsible for battery development, and Rohan Patel, Vice-President for Public Policy and Business Development, both announced their departures from the company.
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Following the news of the impending layoffs, Tesla's stock fell by 2% in mid-morning trading. This comes less than two weeks after the company reported its first year-over-year drop in quarterly car deliveries since 2020. In the first quarter of 2024, Tesla delivered 386,810 vehicles globally, a decrease of over 9% from the 422,875 vehicle sales in the same period last year. This figure fell significantly short of Wall Street's expectations of 457,000 deliveries.
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Despite these challenges, Tesla managed to reclaim its position as the world's top EV seller from BYD, a Chinese electric vehicle manufacturer. Tesla had lost this title to BYD late last year when the latter was praised for offering high-volume models at a lower cost than Tesla's cheapest Model 3 sedan in China.
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Meanwhile, in China, Japanese automaker Nissan has announced plans for 30 new vehicles, 16 of which will be all-electric. The company also hinted at the introduction of "e-POWER and plug-in hybrid models" in the Americas, which utilize a combination of electricity and fuel for power.
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In contrast, Tesla has been slow to update its existing models and recently announced the cancellation of a long-promised inexpensive car that investors had hoped would drive mass market growth. The company, which is set to report its full financials for the first quarter of 2024 on April 23, is bracing for a slowdown in 2024 after years of rapid sales growth.
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In the fourth quarter of 2023, Tesla recorded a gross profit margin of 17.6%, its lowest in over four years. The company is now looking to bolster its margins despite reducing its workforce for the second time in just over a year. In February of the previous year, Tesla had laid off 4% of its workforce in New York as part of a performance review cycle and ahead of a union campaign launch by its employees.
Tesla representatives did not immediately respond to requests for comment on the matter. As the company navigates these challenging times, the global electric vehicle market will undoubtedly be watching closely.
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